The original article Sell Your Crypto on the Stock Exchange was translated by Odaily Planet Daily jk.
Original author: Matt Levine is a Bloomberg Opinion columnist responsible for financial coverage, and his reading volume ranks first on Bloomberg Financial Opinion for many years. He was the editor of Dealbreaker, worked in the investment banking department of Goldman Sachs, was an MA lawyer at Wachtell, Lipton, Rosen Katz, and served as an associate judge on the U.S. Court of Appeals for the Third Circuit.
Crypto Treasury Companies
Last Tuesday, SharpLink Gaming Inc., a company that specializes in online marketing of sports lottery, was trading at about $2.91 per share, with a market value of only about $2 million. It is still listed on the Nasdaq, but it is already in a precarious situation. It just conducted a reverse stock split a few weeks ago to maintain its share price at or above the $1 minimum required by Nasdaq, and it also did not meet Nasdaqs basic requirement of at least $2.5 million in shareholder equity.
Therefore, SharpLink announced a round of additional stock issuance on the same day, raising $4.5 million at $2.94 per share. Officially, the funds will be used to restore compliance with Nasdaqs minimum shareholder equity requirements. However, the company also added: We may use part of the funds to purchase cryptocurrencies to support a treasury strategy we are considering.
To be honest, this is not surprising. SharpLink is technically a public company, but by real standards, it is more like a listed shell - with a market value of $2 million and annual revenue of only a few million dollars, it is difficult for such a scale to support the various operating and compliance costs of being a public company. In the past, this was a problem.
But in 2025, this has become an opportunity. SharpLink has two assets that are very popular in the market but relatively scarce:
It has the shell of a US-listed company;
And I basically didnt use this shell for anything.
This makes it an ideal target company for transforming into a crypto vault . As I have often said before, the US stock market is willing to pay more than $2 for $1 of crypto assets. Entrepreneurs in the crypto industry have long discovered this phenomenon. If you have a large amount of Bitcoin, Ethereum, Solana, Dogecoin, or even TRUMP, the best way is to put them into a US listed company and then sell them to investors in the secondary market at a higher price.
But if you want to do this, you first need a listed company. And there are not many such shell resources, and most high-quality companies are already very busy. If you call Apple Inc. and say We want to merge our Dogecoins with yours to make them more valuable, Apple will definitely reject you.
The real opportunities are in those marginal listed companies: they are still listed, but they are just barely listed. The phones of these companies are now flooded with calls every day.
So we saw news releases like this:
SharpLink Gaming announced a $425 million private placement financing and officially launched its Ethereum Treasury strategy…
SharpLink continues to operate as a company focused on providing performance-driven online marketing services to the U.S. sports lottery industry.
According to the announcement:
After the private placement is completed, SharpLink will officially launch its Ethereum Treasury Strategy;
Joseph Lubin, founder and CEO of Consensys and co-founder of Ethereum, will become chairman of SharpLink’s board of directors after the private placement transaction is completed;
Investors in this private financing round include several well-known crypto venture capital and infrastructure companies, such as ParaFi Capital, Electric Capital, Pantera Capital, Arrington Capital, Galaxy Digital, Ondo, White Star Capital, GSR, Hivemind Capital, Hypersphere, Primitive Ventures and Republic Digital.
In other words, Consensys, a blockchain software company led by the co-founder of Ethereum, hopes to operate a pool of Ethereum assets worth $425 million, and the capital market values this asset much higher than its actual value. SharpLink happens to be the ideal shell resource to achieve this goal. Therefore, Consensys and its co-investors will invest $425 million to purchase SharpLink shares at $6.15 per share, and SharpLink will use this money to purchase Ethereum (ETH).
At the opening of todays trading, SharpLinks stock price was $33.93, and as of 1:30 p.m., it was trading at around $35, with the companys market value reaching $2.5 billion. In other words, this $425 million worth of Ethereum assets has received a $2.5 billion valuation in the U.S. stock market.
It should be noted that SharpLink does not actually hold any Ethereum at present. Investors provide US dollars, not Ethereum. This is not we already have a lot of ETH, why not take it to the market, but since the US stock market is willing to use 2 or even 6 US dollars to buy 1 US dollar of ETH, then of course we have to take advantage of this arbitrage opportunity.
From a certain perspective, this is almost an open arbitrage opportunity. In theory, anyone with a few hundred million dollars in cash can go to the market to buy cryptocurrencies, and then put them into a listed company shell, and the U.S. stock market will immediately give more than 5 times the book profit. What you really need, in addition to the start-up capital, is to find a small listed company that can load the currency.
Remember that snack bar in New Jersey? It once had a fully diluted market value of $2 billion. It just came a little early. In fact, this snack bar (or the shell company behind it) exists for a similar transaction model: a listed shell company, coupled with a small transitional business (such as opening a snack bar), its real purpose is to complete a reverse merger with a private company - most likely a foreign company - and then go public through a backdoor listing. As for why the people in the snack bar still manipulated the stock price and are now in jail, I still don’t fully understand it, but it actually has nothing to do with the logic of the transaction itself. The core of this game is to find a suitable acquisition target.
Unfortunately, that snack bar was shut down before the crypto vault company model really took off, but my god, if it had survived today, it would definitely be an amazing deal. Imagine if that New Jersey snack bar could be combined with a pool of Ethereum assets worth $425 million, its market value of $2 billion at the time would actually be reasonable. Now all it takes is a few hundred million dollars in cryptocurrency, plus a micro-public company, to combine and get a multi-billion dollar valuation in the capital market.
Back to SharpLink: its stock price rose 35% last Thursday and another 79% last Friday, and the deal was only officially announced today. I guess there may be leaks or insider trading, but I dont make such judgments lightly. After all, SharpLink has publicly stated that it is considering a crypto vault strategy, and it is an ideal shell candidate company (listed, but not much business). Even without inside information, it is completely reasonable to speculate: This small company will probably make a crypto-related announcement soon, and the stock price may soar by hundreds of points. I might as well buy some first. Of course, this is not investment advice, and the reasonable I am talking about is not rational in the traditional sense.
The whole thing is pretty outrageous, but I want to focus on three things that are particularly outrageous.
First: Is this trick still working?
I’ve written a lot about “crypto vault companies” in the last few months — MicroStrategy Inc. was basically the first to do this, and has been doing it for years. Recently, this model has suddenly exploded in all aspects. Intuitively, it shouldn’t all be successful .
After all, MicroStrategy is a large public company with a mature investor relations team, a particularly effective publicity strategy for retail investors, and a large amount of Bitcoin in its hands. It also has natural advantages such as first-mover advantage, diversified financing channels, and inclusion in leveraged ETFs and some indexes. If some investors (such as mutual fund managers and some retail investors) want Bitcoin exposure but cannot buy coins or ETFs directly, then MicroStrategy may indeed be worth a certain valuation premium.
But the problem is that there are now a lot of small MicroStrategy copycats that are being treated at crazy premiums by the market. The markets preference for these new crypto vault companies is endless. I have no idea what this phenomenon is.
I wrote a sentence a month ago: The current situation is like the crypto community is constantly fooling the U.S. stock market, and the U.S. stock market is fooled again and again. Now it seems that this feeling is even stronger.
Second point: Are you still doing this?
This isn’t really that surprising: I wrote last month that “it’s simply poor management to run a crypto investment fund and not acquire a dead or thinly traded US public company to play this arbitrage game.”
For all companies related to the crypto field, the lowest capital cost in the world is to acquire a listed company and transform it into a crypto treasury model. Therefore, we have seen players such as Tether, SoftBank, Bitfinex, and Nakamoto Holdings join the battle. The Financial Times even reported that Trump Media Technology Group is also going to play - this is not surprising, to be honest, it would be strange if it didnt join.
However, because of this, most of the listed companies participating in this game (except MicroStrategy) are small, semi-abandoned companies. For example, Apple, a company with real industry, cash flow, and business, certainly will not get involved in this kind of relying on a strange operation to make the stock price soar game.
For some crypto entrepreneurs, the situation may be similar. We have reason to believe that Ethereum founder Vitalik Buterin is more concerned about how to optimize the Ethereum protocol rather than how to package and sell ETH to stock investors at a high price. But for many people, such a valuation premium is too tempting to resist.
The third point: How to monetize?
SharpLink created $2 billion in paper profits this morning. So whats next?
In theory, this profit was created by investors who participated in the private placement (such as Consensys and its co-investors). But the problem is that they probably can’t cash out immediately: usually such private placement transactions have a lockup period, and their shares need to be officially registered before they can be sold. And they hold a total of 97% of SharpLink’s shares. If they sell all of them, the stock price will definitely collapse.
In the year before the deal was announced, SharpLinks average daily volume was only about 75,000 shares. At todays float, it would take them more than three years to sell all of their shares.
Although the stock market now values the ETH they bought for $425 million at $2.5 billion, they cannot take out the $2.5 billion. This paper profit is locked in the stock market valuation and cannot be taken out.
However, this is indeed a question worth studying. Modern finance seems to have found a way to steadily create billions of dollars in market value, and it doesnt take much effort. Although its not to say that anyone can do it in an hour, its clear that many people have discovered that the threshold for this operation is not high.
However, if you cant turn book value into real money, it is just a magic trick. You have become a billionaire in name because you hold 97% of SharpLink Gamings shares, but dont forget that a week ago, the companys 100% valuation was only $2 million. You will also worry about how long this bubble can last.
Of course you would want to lock in some of your profits, but selling directly in the market doesnt seem to be a feasible approach.
Of course, there are some boring but realistic answers: for example, They now own a multi-billion dollar company with extremely low capital costs; they can continue to issue new shares to the public to buy more Ethereum, thereby continuously expanding their empire and influence; when you control a company of this size, you can give yourself a high salary.
It sounds good, but heres the problem: these people already have hundreds of millions of dollars in their hands, and they are not doing this to find a good job.
The real question is – how can they “cash out” that $2 billion?
I don’t have a particularly good answer—if I did, I’d probably just do it. But I want to point out that this problem is very crypto: it’s a classic crypto dilemma that’s now being brought to the stock market by a new generation of “crypto vault companies.”
This is a classic crypto wealth story template:
You create some “magic beans” — a new token, for example — and you hold most of them.
There are not many beans actually traded on the market, but the transaction price is very high, so the market value of the entire project looks very large;
On the surface, you become a billionaire, but once you actually sell those beans, the market will crash and you will get nothing;
Having wealth on paper does bring some benefits, such as reputation, resources and a sense of superiority, but you also know in your heart that this magic bean market may not last long, so you really want to cash out.
The most famous example of this problem is probably the FTX crash:
FTX exchange and Alameda Research investment company controlled by Sam Bankman-Fried (SBF) are worth tens of billions of dollars on paper, but a large part of these valuations are supported by the crypto assets they created themselves. In November 2022, as the market lost confidence in FTX, these tokens quickly returned to zero and the companys valuation evaporated.
I wrote an article at the time and quoted a conversation I had with SBF on a podcast. He said this about a crypto token and the “box” model built around it (Box Token):
If everyone now thinks that the market value of Box Token is about $1 billion, then it basically has this valuation. Everyone will do accounting according to this market value. In fact, you can even use it for financing: pledge this token in a loan agreement to exchange for US dollars. If you think its true value may not exceed two-thirds, you can also pledge part of it, take out the money, and never return it - in the end it will just be liquidated. In a sense, this is already something that can be converted into cash.
In the crypto world, if you have a bunch of “magic beans” with a market value of $1 billion, someone might actually be willing to lend you $500 million in “real money,” and these loans might not have any recourse.
But in the stock market… even if you control a crypto vault company whose market value has increased by 100,000% and you own 97% of it, it is difficult to raise 50% or even 10% of its market value based on its book value.
But seriously, Id give it a try.
Applying game theory: Some people actually cashed out successfully, and...
In the crypto world, there is also a well-known case in which someone successfully “cashed in” a batch of “magic beans.”
In October 2022, Avi Eisenberg, a trader who called himself an Applied Game Theorist, applied game theory to a decentralized crypto perpetual contract exchange called Mango Markets and successfully executed a highly controversial arbitrage operation.
Mango Markets offers perpetual contract trading for a variety of crypto assets, including futures for its own token MNGO. Its contract prices are settled through price oracles from multiple other crypto exchanges: your contract profit or loss on Mango depends on the price fluctuations of the corresponding spot assets on these external platforms.
In addition, Mango also allows users to borrow cryptocurrencies using the floating profits of their positions as collateral. For example, if you make $100 in contract trading, the platform may allow you to pledge this floating profit and borrow $50 in cryptocurrencies - and it is a non-recourse loan , which means that if you cant pay it back, you have no obligation to repay it.
Eisenbergs operation is as follows:
He bought a multi-million dollar long position in MNGO perpetual contracts on Mango Markets;
At the same time, he opened an equal amount of short positions, making the net position zero (flat);
Then, he went to the “reference exchange” corresponding to these contracts and bought a large amount of MNGO spot;
Since MNGOs have low liquidity, his buying significantly pushed up the market price of MNGOs;
This caused the value of his long contract position on Mango to rise rapidly;
He then used the “paper profits” of these long positions as collateral to borrow a large amount of cryptocurrency on Mango and withdraw it;
Then, he reversed and sold MNGO on the reference exchange, pushing down the spot price;
This makes his short contract position more valuable;
He once again used the floating profit from this short position as collateral and borrowed cryptocurrency from Mango again.
Ultimately, according to official disclosures, Eisenberg borrowed and quickly withdrew more than $100 million in crypto assets from Mango Markets.
In laymans terms, its almost as if Eisenberg stole $100 million from Mango Markets. He manipulated the price of MNGO to artificially inflate the market value of his contract positions, and then used these inflated market values as collateral to borrow a large amount of money. Since these loans were non-recourse - which is almost industry practice in decentralized financial platforms - he didnt have to repay them at all.
Of course, he was eventually arrested.
We have discussed this case several times before, including:
When he had just completed the deal;
He later posted a “Statement on Recent Events” on Twitter, explaining that he did do this, but there was no problem because “all of our actions are legal operations in the open market and in accordance with the protocol design, although the protocol development team may not have fully foreseen the consequences of setting these parameters”;
And when he was arrested, U.S. federal prosecutors apparently disagreed with his explanation.
Eisenberg was ultimately found guilty by a jury last April. But last Friday, a judge overturned the conviction.
According to Bloomberg:
U.S. District Judge Arun Subramanian vacated Avraham Eisenberg’s convictions for fraud and market manipulation last Friday, while acquitting him on a third count. The judge determined that the evidence presented during the trial was insufficient to support a jury’s finding that Eisenberg made false statements to Mango Markets, a decentralized finance platform powered by smart contracts.
(This is where the original opinion came from.)
This case exposes two key issues:
First, there is the issue of jurisdiction: Eisenberg was prosecuted in New York, but his so-called “applied game theory operations” took place in Puerto Rico, targeting some technically “borderless” crypto trading platforms.
The three reference exchanges he used to manipulate the price of MNGO were:
FTX, based in the Bahamas;
AscendEX, headquartered in Romania;
Serum, a decentralized exchange, may not have a headquarters at all.
As for the Mango Markets platform itself, there is no evidence showing any direct connection with New York.
There has always been a consensus that if you commit a financial crime, 80% of it will be linked to New York, so federal prosecutors in New York can almost control the entire world. But this case shows that cryptocurrency has approached the limit of this judicial boundary.
In the crypto community, there is a stereotyped belief that as long as you put things on the chain, you can circumvent the jurisdiction of laws in various countries. But the truth is not that simple.
Take Eisenberg’s case for example: although he was sentenced in New York, he could theoretically still be prosecuted in Puerto Rico or even Romania. However, putting things on the blockchain may indeed allow you to escape the judicial tentacles of the U.S. Attorney’s Office for the Southern District of New York (SDNY). In the crypto world, this is already considered a pretty smart “operation”.
That, anyway, is the first key point in this case: Eisenberg’s alleged commodity manipulation convictions were thrown out because prosecutors chose the wrong venue. The U.S. Justice Department could consider re-litigating those charges in Puerto Rico if it wanted to.
But in addition to commodity manipulation, he was also convicted of wire fraud - a charge that was also completely dropped by the judge, and prosecutors had no right to prosecute again.
The second core issue involved is that although Eisenbergs behavior constituted market manipulation, it is not clear whether it constituted fraud.
Under the US Commodity Act (which applies to crypto tokens, including MNGOs), you can be convicted of commodity manipulation if you use “any means of manipulation” in derivatives trading, which is what Eisenberg was prosecuted for. But “wire fraud” is more stringent, requiring the perpetrator to make false statements through a computer or communication system in order to obtain monetary benefits.
The court ruling stated:
To establish fraud, you must prove material misrepresentation. The judge concluded that whatever Eisenberg did, he did not lie to anyone.
The government argued at trial that Eisenbergs fraud was manifested in two main aspects (quoted from the judgment, citation omitted):
He tricked Mango Markets into thinking they were applying for a legitimate cryptocurrency loan, but in reality he was trying to steal funds;
He misrepresented the value of his collateral, making the platform believe it was valuable, when in fact the value was artificially inflated and had no real support.
But none of this constitutes lying .
Clicking the “borrow” button without ever intending to repay the loan may seem fraudulent at first glance, but it doesn’t hold true in the context of a crypto platform offering non-recourse loans.
Under the operating mechanism of this platform, the borrower has no personal repayment obligation: the platform can only use the collateral as a means of recovery. If the value of the collateral falls below the loan amount, it is common to simply abandon the position. As the judge said:
“If a user borrows funds and the value of their collateral plummets, what happens? The system liquidates them. There is no evidence that the ‘borrow’ feature on Mango Markets means that the user is obliged to repay — or even have any other obligations — even though the word might mean that in a traditional context.”
So, in other contexts, if someone intentionally conceals or misrepresents important information about the terms or negotiations of a loan agreement when signing it, it might be considered fraud. But here, there are no terms or negotiations. There is only one word: borrow.
Or to quote SBF: “You never have to pay back the money, you just get liquidated in the end.”
As for “inflating the value of collateral”, Eisenberg did not actually do that: Mango Markets calculated the value of his collateral itself based on market prices (although these market prices were manipulated by him).
Interestingly, this does not constitute fraud, as an earlier case on LIBOR manipulation provides precedent support:
Of course, Eisenberg was well aware that the value of his portfolio was derived through market manipulation, and that it would not hold true for long. So, while his portfolio valuation at the time of the mortgage loan may have been technically “accurate” (based on market prices at that moment), the government believed that his representations of the value of his collateral were deceptive…
The government argued that when Eisenberg borrowed the money, he implicitly communicated two things to Mango Markets:
First, the value of the collateral in his account had not been manipulated;
Second, the collateral is indeed valuable.
Both of these points are false statements in the governments view.
But this logic conflicts with the decision of the U.S. Court of Appeals for the Second Circuit in United States v. Connolly.
In the Connolly case, Deutsche Bank (DB) reported daily to the British Bankers Association (BBA) the interest rate at which DB borrows money in the interbank market.
The defendants, DB traders, sometimes asked LIBOR quoters to submit quotes that were favorable to their positions. Trial evidence showed that other DB employees and LIBOR quoters themselves admitted that adjusting LIBOR quotes for the benefit of traders seemed wrong at the time.
But the court was not convinced. It rejected the government’s argument that the quotes implicitly amounted to “confirmation that the quotes were not subject to trader interference.”
Even if market participants generally believed that traders’ intervention in LIBOR quotes was improper, the fact that there were no rules or guidelines at the time that explicitly prohibited such conduct was decisive. The court noted that although the BBA did later introduce relevant prohibition rules (just as Mango Markets also updated its agreement after Eisenberg’s operation), “no such rules or prohibitions existed at the early stage of the case.”
We also discussed the Connolly case in 2022: LIBOR itself is a snap-up number, so it is unlikely that Deutsche Banks traders committed a crime by making up the wrong number. Now it can be seen that this has a similar logical analogy to the price of MNGO tokens.
In conclusion, what needs to be emphasized here is that, at least at the level of wire fraud, the terms and conditions of the platform are indeed the key. If Mango Markets had clearly told users: If you want to borrow against your position, you must promise that you have not conducted any market manipulation, then Eisenbergs trading would constitute fraud. But it did not say so, or even said anything, so his actions did not constitute fraud.
Another typical creed in the crypto world is: Code is law: as long as a crypto system allows you to do something, you have the right to do it, even if the development team did not fully anticipate the consequences when setting the parameters. Under this philosophy, traditional legal norms, background agreements, or user agreements are not important. The only thing that matters is what code is written in the system.
But thats not exactly what the ruling in this case means. What it actually means is that code can become law. If you run a crypto platform and tell users, Please dont manipulate, attack, or otherwise disrupt, then when someone actually manipulates, they may get in trouble. But if you run a platform and say none of that and just say, This is how the platform works, figure it out, then even if someone finds a loophole in the system and manipulates it, its legal, or at least, it doesnt constitute wire fraud.
This actually makes sense. In my article discussing Eisenberg’s operation, I wrote: “You can imagine two different market systems and let users choose to join one of them”: one is called “Nice Market” , with clear rules prohibiting manipulation and insider trading; the other is called “Fun Market” , which is completely open to the public as long as you can find a way to make a profit. I also suggested that given the relative lack of relevance to the real-world financial system in the crypto system (although this situation is changing), perhaps it can become a test field for “Fun Market”, of course, the premise is that participation is completely voluntary. This may be the little bit of “actual rules” conveyed by this case.
However, all this didn’t really help Eisenberg himself. As Bloomberg points out, when he was arrested in this crypto case, US law enforcement officials found that he had downloaded 1,274 child pornography images and videos between 2017 and 2022, and he was sentenced to about four years in prison for possessing child pornography in May of this year.
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